Patel Uveshbhai Mohmadsalim vs State Of Gujarat
2021 Latest Caselaw 9972 Guj

      R/CR.MA/32718/2016                               ORDER DATED: 30/07/2021




              IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

              R/CRIMINAL MISC. APPLICATION NO. 32718 of 2016
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                           PATEL UVESHBHAI MOHMADSALIM
                                      Versus
                            STATE OF GUJARAT & 1 other(s)
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Appearance:
MR PRATIK B BAROT(3711) for the Applicant(s) No. 1
Mr. H.K.Patel, APP (2) for the Respondent(s) No. 1
UNSERVED REFUSED (N)(10) for the Respondent(s) No. 2
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     CORAM:HONOURABLE MR. JUSTICE B.N. KARIA

                                  Date : 30/07/2021

                                    ORAL ORDER

1. By preferring this application, the applicant has requested to quash

and set aside the proceedings of Criminal Case No. 1254 of 2014 pending

before the Additional Chief Judicial Magistrate Court, Lunavada for the

offence punishable under Section 138 of the Negotiable Instruments Act,

as well as order of process issued dated 14.10.2014.

2. The brief case of this case are as under:-

2.1 That, the applicant-original accused, who was the partner of

Honest Trading Company at Lunavada and was looking over the

management of such company and was connected with respondent No.2

for the purpose of buying grains from him. That, on 11.5.2014, the

applicant purchased grains from respondent No.2 agreeing to pay

Rs.6,63,592/- and as against such purchase, it was promised that the

amount so agreed to be paid to respondent No.2 within a period of one

R/CR.MA/32718/2016 ORDER DATED: 30/07/2021

month, against which, when the same was not paid to respondent No.2

within the said promised period the amount was demanded by respondent

No.2 from the applicant herein and therefore, the applicant issued a

cheque bearing cheque No.000241 dated 12.8.2014 of Rs.6,63,592/-

towards payment of the grains which was purchased in the name of

respondent No.2. That, the applicant signed such cheque in capacity of a

partner to Honest Trading Company. That, a cheque on being deposited

with Bank of Baroda on 26.8.2014, the same was returned back with an

endorsement of "insufficient funds" on 27.8.2014.Therefore, respondent

No.2 issued a legal notice through Registered Post AD on 20.9.2014,

despite the notice was served upon the applicant, he did not chose to

repay back the amount due to respondent No.2 and therefore, an offence

under Section 138 of the N.I.Act was registered against the applicant for

such non-payment.

3. It is submitted by learned advocate for the applicant that the

applicant was a partner of Honest Trading Company at Lunavada and

was acting on behalf of the Company. It is further submitted that as per

Section 141 of the Negotiable Instrument Act and as per decision of the

Apex Court rendered in case of Anita Hada Case Vs. God Father

Travels & Tours Pvt. Ltd. reported in 2012(5) SCC 661 which is

further referred recently now in case of Ajit Balse Vs. Ranga Karkere

reported in 2016(3) SCC Criminal 379 and also rendered in case of

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Onali Ismaileji Sadiket Vs. State of Gujarat reported in 2016(3) GLR

1991. He has also relied the decision rendered in case of G. Ramesh Vs.

Kanike Harish Kumar Ujwal reported in 2019(O) AIJEL-SC 64303, it

is now a mandate of law that unless and until the partnership

firm/Company who is legal entity in the eyes of law is implicated as

one of the accused, complaint itself is not maintainable against partner. It

is further submitted that present case is squarely covered with reported

decisions, as Honest Trading Company on behalf of whom, the applicant

was acting as a partner is not joined as an accused, which is defect of law

and therefore, as complaint itself is not maintainable and the same is

required to be quashed and set aside. No other grievances were raised by

learned advocate for the applicant.

4. While referring the complaint, it appears that the cheque issued on

12th August, 2014. It is submitted that the applicant by tries his level

best to serve the notice to respondent No.2 but it was refused by him to

accept, and therefore, notice was unserved to him. Affidavit of service is

also filed by the applicant namely Uvesh M.Salim Patel in support of his

contention about try to his serve the notice to respondent No.2.

5. Learned Additional Public Prosecutor appearing for the respondent

-State has submitted that it is private dispute between the applicant and

the respondent No.2. He further submits that the complaint is filed under

Section 138 of N.I.Act and hence, this Court may pass necessary order.

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6. No arguments advanced on behalf of the respondent No.2 as he has

refused to accept the notice.

7. Having heard learned advocates for the respective parties and

learned APP for the respondent-State, it appears that as per submission of

learned advocate for the applicant as only question is to be decided by

this Court is whether the complaint under Section 138 of the N.I.Act is

maintainable in the eyes of law in view of the judgements referred by

learned advocate for the applicant . If we refer the complaint produced on

record i.e. Criminal Case No. 1254 of 2014. Para 1 itself speaks that

accused- present applicant is a partner of Honest Trading Company at

Lunavada. He is administrator of the partnership firm. On 11 th May, 2019,

the accused purchased some rationing from the complainant and amount

of Rs.6,63,592/ was to be paid by the accused. On demanding money

from the accused, he issued cheque of Bank of Baroda, Lunavada Branch

for the amount of Rs. 6,63,592/- on 12 th August, 2014 in favour of the

complainant under his signature as partner of the Honest Trading

Company. Complainant deposited the cheque before the bank authority

which was returned back on 27th August, 2014 with an endorsement of

"insufficient fund". Therefore, the complainant issued notice through his

advocate on 20th September, 2014 demanding his amount due with the

applicant-accused. Notice was duly served to the accused on 22 nd

September, 2014 . However, no amount was paid by the accused and no

R/CR.MA/32718/2016 ORDER DATED: 30/07/2021

reply was given in connection with the legal notice issued by the

complainant. Therefore, he has filed impugned complaint u/s. 138 of

Negotiable Instrument Act. If we consider the cheque issued in favour

of the respondent No.2, it was under the signature of the applicant as a

partner of the Honest Trading Company. This Court would like to refer

the decision of this Court rendered in case of Ismailji Sadikot Vs. State

of Gujarat & Anr. passed in Special Criminal Application (Quashing)

No. 4536 of 2015 dated 3.3.2016 which reads as under:-

"14. What is discernible from a conspectus of the authorities referred

to above is that a partnership firm, unlike a company registered under

the Indian Companies Act, is not a distinct legal entity or a juristic

person, but is only a compendium of its partners. Even the registration

of a firm would not make it a distinct legal entity like a company. The

partners of a firm are coowners of the proprietary firm, unlike the

shareholders in a company who are not coowners of the property of

the company.

15 However, the position of a partnership firm so far as Section 138

read with Section 141 of the Negotiable Instruments Act is concerned

appears to be altogether different. Section 141 of the Act reads as

under:

"141. Offences by companies

(1) If the person committing an offence under section 138 is a

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company, every person who, at the time the offence was committed,

was in charge of, and was responsible to the company for the conduct

of the business of the company, as well as the company, shall be

deemed to be guilty of the offence and shall be liable to be

proceeded against and punished accordingly.

Provided that nothing contained in this subsection shall

render any person liable to punishment if he proves that the offence

was committed without his knowledge, or that he had

exercised all due diligence to prevent the commission of such

offence :

[Provided further that where a person is nominated as a Director of a

company by virtue of his holding any office or employment in the

Central Government or State Government or a financial corporation

owned or controlled by the Central Government or the State

Government, as the case may be, he shall not be liable for prosecution

under this Chapter.]

(2) Notwithstanding anything contained in subsection (1), where any

offence under this Act has been committed by a company and it is

proved that the offence has been committed with the consent or

connivance of, or is attributable to, any neglect on the part of, any

director, manager, secretary or other officer of the company,

such director, manager, secretary or other officer shall also be

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deemed to be guilty of that offence and shall be liable to be proceeded

against and punished accordingly.

Explanation. For the purposes of this section.(a) "company" means

any body corporation and includes a firm or other association of

individuals; and (b) "director", in relation to a firm, means a partner

in the firm."

16. Subsection (1) of Section 141 of the Act provides that if a person

committing an offence under the section is a company, every person

who, at the time offence was committed, was in charge of, and was

responsible to, the company for the conduct of the business

of the company, as well as the company shall be deemed to be guilty

of the offence and shall be liable to be proceeded against

and punished accordingly. The offender in section 138 of the Act is

the drawer of the cheque. He alone would have been the offender

thereunder if the Act did not contain other provisions. It is because of

section 141 of the Act that penal liability under section 138 is cast on

other persons connected with the company. Three categories of

persons can be discerned from the said provision who are brought

within the purview of the penal liability through the legal fiction

envisaged in the section. They are: (1) The company the principal

offender which committed the offence, (2) Every one who was in

charge of and was responsible for the business of the company, (3)

Any other person who is a director or a manager or a secretary or

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officer of the company, with whose connivance or due to whose neglect

the company has committed the offence. However, if a person proves

that the offence was committed without his knowledge, or that he had

exercised all due diligence to prevent the commission of such offence,

he shall not be liable to punishment under this section. Subsection (2)

further provides that where any offence under this Act has been

committed by a company and it is provided that the offence has been

committed with the consent or connivance of, or is attributable to, any

neglect on the part of, any director, manager, secretary or other

officer of the company, such director, manager, secretary or other

officer shall also be deemed to be guilty of that offence and shall be

liable to be proceeded against and punished accordingly. The

Explanation to the section defines 'company' as any body corporate

and includes a firm or other association of individuals; and

'director', in relation to a firm, means a partner in the firm.

17. It is only the drawer of the cheque, who can be held responsible for

an offence under Section 138 of the Act. Section 141 provides for the

constructive liability. It postulates that a person, in charge of

and responsible to the company, in the context of the business of

the company, shall also be deemed guilty of the offence. The drawer

can be a company, a firm or an association of individuals, but

only those directors, partners, or officers can be held responsible for

the offence punishable under Section 138 of the Act, who are

responsible to the company - firm for the conduct of its business.

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18 The Legislature has thought fit to provide an explanation in

Section 141 of the Act and the plain reading of the expression

"company" as used in Subclause (a) of the explanation appended to

Section 141 of the Act shows that it is an inclusive of any body

corporate or "other association of individuals". Though the heading

of Section 141 of the Act reads "offences by companies"; according to

the explanation to that Section, "company" means "any body

corporate and includes a firm or other association of individuals and

"director", in relation to a firm means "a partner in the firm". The

term "other association of individuals" should not be understood to

refer even to informal understanding between the individuals. It has

to be understood in the context of body corporate and partnership

firms. The principal of ejusdem generis gets attracted in such a

case. Therefore, a sole proprietary concern is not a company within

the meaning of "company" as defined under the explanation to

Section 141 of the Act.

19 The Explanation to Section 141 makes it clear that wherever there

is a reference under Section 141 to a company it has to be substituted

by the word firm where the accused is a partnership firm and the

provision has to be read as if it refers to the firm. What this means is

that a complaint can be filed for the offence under Section 138

Negotiable Instruments Act not only against the partnership firm on

whose behalf the cheque was issued but also against an individual

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partner or person who, at the time of the commission of the offence,

was in charge of the affairs of the firm or responsible to it for the

conduct of its business. There is nothing in the provision which

indicates that in every complaint involving the dishonour of a cheque

issued by a firm both the firm as well as its partners have to be

compulsorily impleaded. In other words a complaint in which only the

firm is made an accused and the partners are not would not be bad in

law for that reason. Clearly that is not the intention of the Parliament.

20 A partnership firm is a separate legal entity in terms of the Indian

Partnership Act 1932 and it is answerable in law in that capacity. That

is how under various statutes like the Income Tax Act 1961, the

Central Excises Act 1944, the Sales Tax Laws and Section 141

Negotiable Instruments Act, a firm can be proceeded against as such.

It is perfectly possible for a complainant, aggrieved by the dishonour

of a cheque issued by or behalf of a firm, to file a complaint for the

offence under Section 138 Negotiable Instruments Act only against

the firm. The complainant may choose not to proceed against the

individual partners as accused either because he is not aware as to

who are the partners or is not interested in proceeding against the

partners apart from the firm.

8. In another case rendered in case of Ajit Balse Vs. Ranga Karkere

reported in (2016) 3 SCC (Cri.) 379, the Hon'ble Apex Court has taken

the same view in para referring the decision of Anit Hada's case which

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is observed as under :-

"15. In Aneeta Hada case [Aneeta Hada v. Godfather Travels and Tours

(P) Ltd., (2012) 5 SCC 661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri)

241] , the Court, inter alia, held: (SCC pp. 687-88, paras 53 & 58-59)

"53. It is to be borne in mind that Section 141 of the Act is concerned with the

offences by the company. It makes the other persons vicariously liable for

commission of an offence on the part of the company. As has been stated by us

earlier, the vicarious liability gets attracted when the condition precedent laid

down in Section 141 of the Act stands satisfied. There can be no dispute that

as the liability is penal in nature, a strict construction of the provision would

be necessitous and, in a way, the warrant.

***

58. Applying the doctrine of strict construction, we are of the considered

opinion that commission of offence by the company is an express condition

precedent to attract the vicarious liability of others. Thus, the words 'as well

as the company' appearing in the section make it absolutely unmistakably

clear that when the company can be prosecuted, then only the persons

mentioned in the other categories could be vicariously liable for the offence

subject to the averments in the petition and proof thereof. One cannot be

oblivious of the fact that the company is a juristic person and it has its own

respectability. If a finding is recorded against it, it would create a concavity

in its reputation. There can be situations when the corporate reputation is

affected when a Director is indicted.

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59. In view of our aforesaid analysis, we arrive at the irresistible conclusion

that for maintaining the prosecution under Section 141 of the Act, arraigning

of a company as an accused is imperative. The other categories of offenders

can only be brought in the drag-net on the touchstone of vicarious liability as

the same has been stipulated in the provision itself. We say so on the basis of

the ratio laid down in C.V. Parekh[State of Madras v. C.V. Parekh, (1970) 3

SCC 491 : 1971 SCC (Cri) 97] which is a three-Judge Bench decision. Thus,

the view expressed in Sheoratan Agarwal[Sheoratan Agarwal v. State of M.P.,

(1984) 4 SCC 352 : 1984 SCC (Cri) 620] does not correctly lay down the law

and, accordingly, is hereby overruled. The decision in Anil Hada [Anil Hada

v. Indian Acrylic Ltd., (2000) 1 SCC 1 : 2001 SCC (Cri) 174] is overruled

with the qualifier as stated in para 51. The decision in Modi Distillery [U.P.

Pollution Control Board v. Modi Distillery, (1987) 3 SCC 684 : 1987 SCC

(Cri) 632] has to be treated to be restricted to its own facts as has been

explained by us hereinabove."

16, The learned Counsel appearing on behalf of the respondent while

accepting that Adivasi Machua Samiti, Sirsida on whose behalf cheque was

issued was not impleaded as the accused before the trial Court, contended

that the judgment in Aneeta Hada case cannot be made applicable

retrospectively in respect of cases where the conviction took place much prior

to the judgment. However, such objection cannot be raised in the present

case. Though judgment in Aneeta Hada is prospective but is applicable in all

pending cases, including the trial, appeal, revision and special leave petition/

appeal pending before this Court. The case of the appellants being covered by

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the decision in Aneeta Hada case, we set aside the impugned judgment and

conviction passed by the trial Court as affirmed by the appellate court and the

impugned order dated 31.8.2012 passed by the High Court of Chhattisgarh at

Bilaspur in Criminal Revision No.365 of 2012.

9. In another case rendered in case of G Ramesh (Supra), it is

observed as under :-

15. In the present case, it is evident from the relevant paragraphs of the

complaint which have been extracted above that the complaint contains a

sufficient description of (i) the nature of the partnership; (ii) the business

which was being carried on; (iii) the role of each of the accused in the

conduct of the business and, specifically, in relation to the transactions which

took place with the complainant. At every place in the averments, the accused

have been referred to in the plural sense. Besides this, the specific role of

each of them in relation to the transactions arising out of the contract in

question, which ultimately led to the dishonour of the cheques, has been

elucidated.

16. The complaint contains a recital of the fact that the first set of cheques were returned for insufficiency of funds. It is alleged that the first respondent transferred an amount of Rs 1,00,000 on 8 February 2011 and 10 February 2011. The complaint also contains an averment that after the second set of cheques were dishonoured, the accused assured the complainant that they will be honoured on re-presentation in the month of July 2011. The averments are sufficient to meet the requirement of Section 141(1).

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17. The High Court proceeded on the basis that the first accused was a company in which the other two accused were directors. Section 141 undoubtedly uses the expression "company" so as to include a firm or association of persons. The fact that the first accused, in the present case, is a partnership firm of which the remaining two accused are partners has been missed by the High Court.

10. It appears from the affidavit of the service produced on

record by the applicant on oath, which reads as under:-

1. I am authorized by Advocate for the applicant to serve the

notice of the said Criminal Misc. Application.

2. I receive the packet containing the notice order passed in this

petition for service from office of the Hon'ble High Court.

3. On 16th February, 2017, I have tried to serve the notice at

Ditwas but the shop and residence of respondent No.2 was closed.

Thereafter, I have contacted the Respondent No.2 on his

Mobile No.9825126230 on 17.2.2017 and I have also scanned the

notice and send him on his whatsapp at 3:18 p.m. which he has

read the contents of notice at 5:36 P.M.

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Thereafter, he has come to Lunawada on 26.2.2017 and I

have contacted in person and tried to serve the notice to him but the

Respondent No.2 has refused to take the notice.

11. In the present case, the partner of Honest Trading Company is

implicated as accused person and therefore, complaint u/s. 138 of

N.I.Act, without impleading the the partnership firm, is not sustainable .

Not only that, without comply with the mandatory provision of Section

141 of the Negotiable Instrument Act as well as without impleading the

Company or partnership Firm in the complaint, the initiation of

proceedings by the complainant is not sustainable.

12. In the aforesaid discussion, the complaint filed by the respondent

No.2 being Criminal Case No. 1254 of 2014 pending before the learned

Additional Chief Judicial Magistrate, Lunavada is not maintainable and

deserves to be quashed and set aside. Hence, this application is allowed.

Rule is made absolute to the aforesaid extent.

(B.N. KARIA, J) BEENA SHAH